The radical reworking of rural healthcare

Published
2:40 pm CDT, Thursday, June 4, 2015

In health care, rural America starts out sickly and neglected: more hypertension, more diabetes, more suicides, more serious accidents that are more often fatal, more uninsured patients, more people on Medicare and fewer physicians.

As tectonic forces reshape even the healthiest parts of the national health care system areas with the lowest populations are taking the biggest hits — a surging shortage of primary care doctors, escalation of insurance rates, costly new technology and dramatically rewritten regulations among those hits.

It’s not that the problems faced in the farmlands and dwindling Rust Belt burgs are different. But those woes get magnified in places where trees can outnumber people and the thin black ribbon of road connecting patient to care stretches 40 miles.

The reality is, in 1970, health care spending was 7.2 percent of the country’s gross domestic product. In 2010, it was 17.9 percent. Predictions peg it at 19.8 percent — nearly one-fifth — in 2020. The ramification is the customer base in rural settings is too small to keep some operations going under the current system

In both urban and rural America, “the cost pressures are the same,” said National Rural Health Association’s Brock Slabach, who is senior vice president for membership services. “The problem is we are dealing with older, sicker and poorer people. You’ve got a more challenging population you have to take care of, and sometimes reimbursements do not recognize those unique challenges.”

So, for example, when an urban hospital needs a new, $700,000 CT scanner, the cost will be covered by the thousands of patients using that facility. In a rural hospital, the same equipment may never get used enough to pay for itself. It’s not a one-time cost; the equipment must be maintained.

Yet both hospitals, respectively, may get the same insurance reimbursement for a CT scan. In fact, rural health care providers often get less from Medicare than their urban counterparts. A favorite statistic cited by the National Rural Health Association is, in 2009, the average payment per discharge for rural hospitals was $7,342, but for urban hospitals, it was $10,274

In what is perhaps a bit of irony, improvements in care impact hospitals’ bottom lines by emptying beds sooner. Slabach used cataract surgery as an example.

“When I started in the late ’70s, early ’80s, a cataract patient would stay two days in the hospital after surgery. Now it’s outpatient work. They are home by lunch,” Slabach noted.

Empty beds fail to generate revenue but still generate cost.

And while keeping up with the high tech tools and newest regulations make medicine more expensive, the largest cost for any rural provider is labor, Slabach noted.

“In a rural hospital, staffing will be at least 50 percent or more (of the hospital’s cost),” he said.

It takes a bigger chunk of the budget pie because the volume of patients is lower, yet the doctors expect the same salary as urban hospitals pay because those physicians went through the same education and had to pay for the same training.

The salary picture is being transformed by the trend of consolidation in an effort to cut costs and meet new rules. A leading source of cutting-edge business and legal information for healthcare industry leaders, Chicago-based Becker’s Healthcare, in its trade publication, Becker’s Hospital Review, it crunched numbers in 2013 to show that the percentage of specialty physicians employed by hospitals has climbed from 5 percent in 2000 to 25 percent. The percent of primary-care physicians working for hospitals has doubled in the same time, from 20 to 40 percent.

Insurance companies are consolidating, as well. During a recent government hearing regarding a proposed merger of insurer Blue Cross of Northeast Pennsylvania and the much larger Highmark Inc., Blue Cross Chief Executive Officer Denise Cesare cited the small nonprofit’s inability to compete with giants like Aetna, which recently purchased Coventry Health for more than $5 billion.

“Aetna can spread risk across more than 18 million medical subscribers,” Cesare testified. “Compared to 300,000 for us.”

Cesare also noted that large insurance companies can and do have the resources to buy up hospitals and physician networks, putting doctors in even greater demand.

Higher demand means tougher competition when hiring, and rural America starts the recruiting competition already behind the proverbial eight ball; less than 10 percent of the nation’s doctors serve one-quarter of the population. The Health Resources and Services Administration, which is an agency of the U.S. Department of Health and Human Services, cite 2,157 Health Professional Shortage Areas as lacking in primary medical care, dental or mental health providers in rural and frontier areas compared to 910 Health Professional Shortage Areas in urban areas.

The Affordable Care Act is likely accelerating consolidation by encouraging formation of “Accountable Care Organizations” made up of networks of doctors, hospitals and providers coordinating patient care. The Affordable Care Act offers Medicare bonuses when that care is delivered more efficiently.

New regulations will hit small town and rural providers harder than their healthier and often wealthier urban neighbors. In October, the American Medical Association penned a letter to Centers for Medicare and Medicaid Services warning of a “regulatory tsunami” in the making, thanks to new electronic record-keeping regulations.

The American Medical Association called for streamlining three programs because generally the system “forces physicians to register and report their information multiple times in a variety of formats that is not only time consuming but creates wide-spread confusion.”

The association urged that more time be spent evaluating the impact on large physician groups before “penalties are ratcheted up and extended to small and singular-owned practices.”

But the impact of all these changes, and others, is already here.

“There has been a pronounced increase in the number of closures of rural hospitals since January 2013,” Slabach noted. “There have been 27 that closed or seriously scaled back services nationally. This compares to the previous eight or nine years when we had just two or three hospitals close.”

The country doctor working alone is disappearing. A new paradigm is needed, Slabach said. The nation is moving “to market-based programs to efficiently deliver health care, but that isn’t appropriate in a rural community because it isn’t a big enough market to make it work.”

What we’re struggling with in this country is deciding what should somebody living in a rural area expect in access, regardless of the volume (of patient load) that is able to support it.”